Clause 5 - Prohibition: exemption

Civil Aviation Bill – in a Public Bill Committee at 4:30 pm on 28th February 2012.

Alert me about debates like this

Question proposed, That the clause stand part of the Bill.

Photo of Theresa Villiers Theresa Villiers The Minister of State, Department for Transport

The clause defines what comprises a dominant airport area and a dominant airport. Under subsection (3), “airport area” means an area that consists of or forms part of an airport, including land and buildings. The provision is included to allow for the possibility of there being more than one operator at an individual airport. That could be the case if, for example, an airline acquired or leased a terminal building. As there can be more than one airport area at an airport, it follows that there can be more than one operator of an airport area.

Subsection (1) states that an airport area is dominant if the CAA has made a determination that the market power test is met in relation to the area and publishes a notice to that effect. Subsection (2) provides that an airport is dominant if all or part of its core area is a dominant area or part of a dominant area. Subsection (4)  describes what comprises a core area: broadly speaking, the core area includes runways and associated facilities, passenger terminals and cargo processing areas.

It follows that non-core airport areas include car parks with pedestrian access to the terminal building, or the forecourt of a passenger terminal including pick-up and drop-off points. Therefore, if the only dominant airport area at airport X comprises the pick-up and drop-off points, airport X would not be a dominant airport, because no part of the core area would comprise or be included in a dominant area. In such circumstances, no part of the airport could be subject to regulation.

The rationale is to ensure that no part of an airport is subject to regulation unless some part of the core area is dominant. That construction is required to prevent unnecessary regulation where there is a problem only with peripheral areas. I commend the clause to the Committee.

Photo of Nicholas Dakin Nicholas Dakin Opposition Whip (Commons)

It is a pleasure to serve under your chairmanship, Mrs Riordan. I rise to draw attention to the evidence that we heard on the clause from Emma Gilthorpe of BAA and to give the Minister the opportunity to deal with it. She outlined in detail the purpose of the clause, but it sounded complicated to me, and that was the concern raised by Emma Gilthorpe. She said:

“My concern is that the way clause 5 is constructed is incredibly complicated and quite difficult to interpret”,

although maybe the Minister did well at interpreting it. None the less, that is the concern of people in the business.

Emma Gilthorpe gave an example, saying that,

“it is unclear to me whether, for instance, some of the rail assets, particularly Heathrow Express—a service that is very much prized by passengers using Heathrow as an integrated hub—would be in or outside of the regulatory construct. If it was not in, no business case would support private investment in Heathrow Express.”

She continued:

“It is very important that we get these parameters clear and predictable”— the key word is “predictability”—

“so that future investments are not impaired.”––[Official Report, Civil Aviation Public Bill Committee, 21 February 2012; c. 8, Q6.]

Emma Gilthorpe felt that a simpler construction would best deliver that. I make that contribution just to give the Minister an opportunity to deal with those points raised in evidence to us.

Photo of Theresa Villiers Theresa Villiers The Minister of State, Department for Transport 4:45 pm, 28th February 2012

I would be happy to do that. I am grateful to the hon. Gentleman for raising the points. I acknowledge that there is a degree of complexity in the clause. The overall result of our reform of airport economic regulation will be to inject far more clarity than there is currently, but yes, in this clause, there is some complexity. One of the main reasons for that is the Government’s decision to keep open the option of inter-terminal competition in future. That was touched on in the discussions with witnesses. The Competition Commission is not currently saying, “Let’s go ahead with it,” but it is something that it has considered in the past. It is in use at some airports in the United States, JFK being the obvious example.

The Competition Commission’s view was that it would be useful if we kept this open as an option for the future, so the Bill is drafted to ensure that if, in future,  the Competition Commission decided that the best way to protect the interests of end-users was through competition within airports, it would not be necessary for the Government of the day to return to Parliament to ask for an amendment to the regulatory regime to enable that to happen. The Bill does not in any sense mandate inter-terminal competition. It merely means that we are doing our best to futureproof the regulatory system, so that if a future Competition Commission decided that that was the best way to protect passengers, the regulatory system would be capable of dealing with that.

On the specific point about the Heathrow Express, which has come up a few times, I understand BAA’s technical concerns about the matter. We are keen to explore them with BAA. As I said this morning, I am confident about important surface infrastructure such as the Heathrow Express; there is every likelihood that that would continue to be on the regulated asset base. As I said in response to the point raised by the hon. Member for Blackley and Broughton, it is probably not possible for me as a Minister to give 100% cast-iron guarantees on that kind of thing. There is a degree of legal risk whatever one does, but with regard to investments of that type, they are on the regulated asset base at the moment, so one would expect that to continue under the new regime, because the Heathrow Express is manifestly a provision that benefits end-users.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.